MASTER OF BUSINESS ADMINISTRATION CASE STUDY The Anomaly of Airlink Modules: Emotional and Spiritual Intelligence and Strategic Financial Management INSTRUCTIONS Please make very sure that you: • Print your case study on both sides of each page (ie no blank pages); • Make handwritten notes only in the margins from the point at which the case study text begins to the end of the printing; • Do not make any handwritten notes on this page or the next, or on any blank pages following the end of the case study text; and • Bring your annotated case study with you to your exam. Note that: • This case study presents the situation experienced at a social enterprise. • It will outline several real dilemmas, for which you need to offer practical solutions based on what you have learnt. • As in real life, you might not be given all relevant data, and will need to make and state the assumptions with which you are working. Contact details: Regenesys Business School Tel: +27 (11) 669-5000 Fax: +27 (11) 669-5001 Email: [email protected] www.regenesys.co.za CONTENTS 1. INTRODUCTION ........................................................................................................................................ 1 2. LEADERSHIP ............................................................................................................................................ 2 3. OVERCOMING OBSTACLES .................................................................................................................... 3 4. POLITICAL INCIDENTS ............................................................................................................................ 3 4.1 THE PRESIDENT’S WIFE ................................................................................................................. 3 4.2 THE MINISTER OF TRANSPORT ..................................................................................................... 5 4.3 THE PRESIDENT OF MADAGASCAR .............................................................................................. 7 5. REGULATORY INCIDENTS ...................................................................................................................... 9 5.1 THE CIVIL AVIATION AUTHORITY .................................................................................................. 9 5.2 THE COMPETITION COMMISSION ............................................................................................... 11 5.3 THE LABOUR APPEAL COURT ..................................................................................................... 14 5.4 POLICE SPECIAL FORCES AND THE “HIJACKING” .................................................................... 17 6. NEW STRATEGIC ISSUES ..................................................................................................................... 19 6.1 SOUTH AFRICAN EXPRESS .......................................................................................................... 19 6.2 DIRECT FLIGHTS TO BUSH CAMPS ............................................................................................. 21 7. REGENESYS BUSINESS SCHOOL GRADUATION SPEECH (2016) ................................................... 22 8. ANNEXURE A .......................................................................................................................................... 26 List of Figures FIGURE 1: COMPETITION TRIBUNAL OF SOUTH AFRICA ........................................................................ 12 Document Change History Date of Publication: October 2016 Publisher: Regenesys Management Place of Publication: Sandton Date Version Initials Description of Change September 2016 1 WS Document supplied 24 October 2016 2_e RT Case study edited 28 October 2016 3_e_f SK Formatted 28 September 2017 4_e_f SK Updated for new exams 1. INTRODUCTION Mr Rodger Foster, the CEO and MD of SA Airlink (Pty) Ltd, is an anomaly. He bucks the trend in many ways. He has served in his top position for over two decades, surviving the numerous changes associated with the various political leaders who have come and gone during this time, as well as run-ins with various regulatory bodies, such as the Civil Aviation Authority and the Competition Commission, and even the courts. But more than being a mere survivor, Mr Foster is a winner, and has somehow managed to keep his airline profitable in a difficult business environment, where the many industry-specific challenges have contributed to the demise of several of his former competitors, such as Nationwide Airlines, Interlink Airlines, Velvet Sky, and 1Time. The airline industry has been extremely tough for the past decade around the world, not only in South Africa. In the United States, for example, Arrow Air (Florida), an established airline that had operated continuously since 1947, crashed out in 2010. It followed in the sad footsteps of Aloha Airlines (Hawaii), which operated from 1946 to 2008, and was in turn soon followed by AirNow (Vermont), which was in business from 1957 to 2011. One of the best- known collapses was Continental Airlines (Texas), which had survived the ups and downs of the airline industry since 1937, before going belly up 75 years later in 2012. But when the going gets tough, then unprofitable national carriers sometimes get government bail- outs: Treasury says … it has granted South African Airways’ (SAA) application for a bailout … Yesterday, “ Finance Minister Pravin Gordhan … announced the approval of a R5 billion going concern guarantee. Reference: http://business.iafrica.com/news/1035667.html Private airlines such as SA Airlink (Pty) Ltd do not qualify for government bail-outs. They have to sink or swim, based on nothing other than the quality of their leadership, strategy, operations, and client services. Airlink has been swimming very successfully for the past couple of decades. As Mr Foster summarised: “Other competitors are struggling in a flat economy, and against this backdrop it is pleasing that “ Airlink continues growing its passenger volumes by 9%, its revenue by 13%, and returns on equity of more than 25%. Today, Airlink operates to more than 40 destinations in the region, and each year it offers more than 46,000 flights annually which together carry over 1,400,000 customers.” © Regenesys Business School 1 2. LEADERSHIP After school, Rodger Foster attended the University of the Witwatersrand, where he read for a bachelor of science (B.Sc.) degree in building in the Faculty of Architecture. During this time, he became the chairman of the Council of Architectural Students. Mr Foster’s first job was as the store development project manager for the Metro Cash and Carry chain, where he worked for two years in the Johannesburg area, doing turnkey store development for the group. However, searching for new challenges, Mr Foster then participated in forming the Foster Webb Group, of which he was the joint managing director for the next 10 years. The Foster Webb Group undertook diverse civil engineering and building construction projects, mostly in the commercial and industrial sectors, while also running a small air charter company from Lanseria Airport. Finally, in May 1992, Mr Foster was appointed CEO and MD of SA Airlink, where he has remained until today. Straddling the divide between strategic leadership and operational management, one of Mr Foster’s former colleagues publicly commented that: “Rodger was an exceptional leader, a strategic thinker, whilst at the same time always managing to “ stay in touch with the detailed day-to-day operations. Although I last worked with him many years ago, I still remember, and practise, some of the lessons learnt under his leadership at SA Airlink”. Reference: https://za.linkedin.com/in/rodger-foster-837b382b The combination of effective management and exceptional leadership is difficult to define and attain, as managers and leaders have different qualities and characteristics, and play different roles. A manager can, however, display leadership qualities and a leader can display management qualities. Very occasionally, one person can fulfil the roles of both manager and leader. In South Africa, the home of SA Airlink, and elsewhere, the mainstream leadership literature has been dominated by the western paradigm of business. This paradigm has also been imprinted on other leadership cultures such as the African and eastern paradigms. The dominance, and some aspects of the universal appropriateness, of the western business leadership paradigm are now being challenged in some quarters. © Regenesys Business School 2 3. OVERCOMING OBSTACLES The question that many ask is: How exactly has SA Airlink managed to stave off adversity throughout its history, and what has enabled SA Airlink to survive and flourish where many other airlines have failed? To begin with, there has been some “universal adversity” that negatively affected all airlines everywhere, as Mr Foster notes: “It is true that Airlink has been confronted by multiple adverse challenges in our history. The most 1 “ significant of these was 9/11 , which changed air travel especially as regards security, and decimated the global economy overnight causing many airlines throughout the world to fail.” Financial performance, however, is not the only criterion of a company’s performance. The traditional business paradigm of performance is now also being challenged, since pure financial performance does not adequately address the changing context of global business. Social and environmental